test if you can play midi files :
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A) double_click on any of : c:\WINDOWS\Media\CSSAMP1.MID, c:\WINDOWS\Media\flourish.mid, onestop.mid, town.mid
or
B) test if you hear anything on any of the LordKevin's prods using standard midi default port :
http://www.pouet.scene.org/prod.php?which=28544, http://www.pouet.net/prod.php?which=28670

if A and B fail :
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1) verify default midi device present in XP :
in "Audio properties" and "Audio devices" tab :
verify the "Preferred device" in "Midi Music Playback" section has a default value
2) verify midi port enabled in bios :
there should be option "Enable MPU-401" or similiar in your BIOS if your motherboard has such port

if only B fails :
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Remap default midi port : possible midi I/O addresses are set by switch or/and BIOS and they are ports 330H (for data and command, status at 331H), 332H, 334H and 336H. The factory default is 330H.

sensenstahl : what is your xp version when you type ver in ntvdm (the .nfo indicates it was tested on WinXP v5.1.2600 - XPSP3 family edition 2002) ?
Also did you modify the Config.nt or Autoexec.nt from their original state ?

Backspace, what is your OS version please ?
Please try : http://support.microsoft.com/kb/314106
after making sure you have not disabled NTVDM as Microsoft recommends :
http://smallvoid.com/article/winnt-ntvdm-subsystem.html